Compensation governance and principles

Compensation policies and plans at Sulzer reward performance, sustainable growth and long-term shareholder value creation. The compensation programs are competitive, internally equitable, straightforward and transparent. The compensation report is prepared in accordance with the Ordinance against Excessive Compensation in Listed Stock Corporations (Compensation Ordinance), the SIX Swiss Exchange Directive on Information relating to Corporate Governance (RLCG) and the principles of the Swiss Code of Best Practice for Corporate Governance.

Nomination and Remuneration Committee

The Articles of Association, the Board of Directors and Organization Regulations, and the Nomination and Remuneration Committee Regulations (please find them at www.sulzer.com/governance, under “Regulationsˮ) define the functions of the Nomination and Remuneration Committee (NRC). The NRC supports the Board of Directors in nominating and assessing candidates for positions on the Board of Directors and Executive Committee, in establishing and reviewing the compensation strategy and principles, and in preparing the respective proposals for the Shareholders’ Meeting regarding the compensation of the members of the Board of Directors and of the Executive Committee.

The NRC is responsible for the following activities and submits all proposals concerning these activities to the Board of Directors, which has the final decision authority:

Periodic assessment of the membership structure of the Board of Directors, determination of selection principles and identification of potential candidates to the Board of Directors
Succession planning for the CEO and Executive Committee positions (two upper management levels)
Periodic assessment of the compensation policy and programs
Determination of performance targets for the CEO and the Executive Committee positions for the purpose of the incentive plans
Preparation of the respective proposals for the Shareholders’ Meeting on the maximum aggregate amounts of compensation for the Board of Directors and for the Executive Committee
Determination of the target compensation for the CEO and for the Executive Committee positions
Preparation of the compensation report

The table below describes the levels of authority:

	CEO	NRC	Board	Shareholders’ Meeting
Selection criteria and succession planning for Board of Directors		proposes	approves
Selection criteria and succession planning for Executive Committee	proposes	reviews	approves
Compensation policy and programs		proposes	approves
Aggregate maximum compensation amounts for the Executive Committee and for the Board of Directors to be submitted to vote at the AGM		proposes	reviews	approves (binding vote)
Individual compensation of the members of the Board of Directors		proposes	approves
Compensation of the CEO		proposes	approves
Individual compensation of the members of the Executive Committee	proposes	reviews	approves
Performance objectives and assessment of the CEO		proposes	approves
Performance objectives and assessment of the Executive Committee	proposes	reviews	approves
Compensation report		proposes	approves	consultative vote

The NRC consists of at least three members who are non-executive and independent and who are elected individually and annually by the Shareholders’ Meeting for the period of office until the following ordinary AGM. At the 2021 AGM, Gerhard Roiss (Chairman) and Hanne Birgitte Breinbjerg Sørensen were reelected as members of the NRC. Suzanne Thoma was elected for the first time to the Board of Directors in 2021 and since then is also member of the NRC. She replaced Marco Musetti as a member of the NRC.

The NRC meets as often as the business requires, but at least twice a year. In 2021, the NRC held four regular and six extraordinary meetings that were attended by all members. Besides the standard agenda items, the NRC further focused its efforts on ensuring continuity and succession planning for the positions on the Board of Directors and the Executive Committee.

The CEO and the Chief Human Resources Officer, who serves as the Secretary of the NRC, generally attend the meetings. The Chairman of the Committee may invite other executives to join the meeting in an advisory capacity, when appropriate. However, the CEO and any other executives do not participate in the meetings, or parts of it, when their own remuneration and/or performance is discussed.

The Chairman of the NRC reports to the next meeting of the full Board of Directors on the activities of the NRC and the matters debated. The Chairman, as far as necessary, submits the respective proposals for approval by the Board of Directors. The minutes of the NRC meetings are available to all members of the Board of Directors.

The NRC may appoint third-party companies to provide independent advice or perform services as it deems necessary for the fulfillment of its duties.

Shareholders’ role and engagement

The company is keen to receive shareholders’ feedback on the compensation policy and programs, and it began the practice of holding a consultative vote on the compensation report in 2011. Further, the company regularly meets with shareholders and shareholder representatives to understand their perspectives. At the AGM, shareholders approve the maximum aggregate compensation amounts for the Board of Directors and for the Executive Committee in an annual binding vote.

Further, the Articles of Association, which are also subject to shareholders’ approval, regulate the principles of compensation. They include the following provisions related to compensation (full version of the Articles of Association can be found at www.sulzer.com/governance, under “Articles of Associationˮ):

Principles of compensation (article 31): Non-executive members of the Board of Directors receive fixed compensation only. Members of the Executive Committee receive fixed and variable compensation elements. The variable compensation may include short-term and long-term variable compensation components. These are governed by performance metrics that take into account the performance of the company, the group or parts of it, targets in relation to the market, other companies or comparable benchmarks and/or individual targets, as well as strategic and/or financial objectives. Compensation may be paid in the form of cash, shares, options, financial instruments or similar units, in kind, in services, or in other types of benefits.
Shareholders’ binding vote on remuneration (article 29): the Shareholders’ Meeting shall approve the maximum aggregate amount of compensation for the Board of Directors for the next term of office and the maximum aggregate amount of compensation for the Executive Committee for the following financial year. The Board of Directors shall submit the annual compensation report to an advisory vote at the AGM.
Additional amount for members of the Executive Committee hired after the vote on remuneration by the Shareholders’ Meeting (article 30): to the extent that the maximum aggregate amount of compensation as approved by the Shareholders’ Meeting does not suffice, up to 40% of the maximum aggregate amount of compensation approved for the Executive Committee is available, without further approval, for the compensation of the members of the Executive Committee who were appointed after the AGM.
Loans, credit facilities, and post-employment benefits for members of the Board of Directors and of the Executive Committee (article 34): the company may not grant loans or credits to members of the Board of Directors and of the Executive Committee.

Special report – medmix spin-off

Compensation architecture for the CEO and EC members